EXECUTIVE SUMMARY OF TATA POWER-T

TRUE-UP PETITION FOR FY 2011-12 AS WELL

AS MYT PETITION FOR FY 2012-13 TO FY

2015-16

TABLE OF CONTENTS

TABLE OF CONTENTS ......................................................................................................................................... I

LIST OF TABLES ............................................................................................................................................... III

LIST OF ABBREVIATIONS ................................................................................................................................ IV

1 EXECUTIVE SUMMARY ........................................................................................................................... 6

1.1 FILINGS UNDER MYT REGULATIONS, 2011 .................................................................................................... 6

1.2 ARR / MYT FOR THE SECOND CONTROL PERIOD – FY 2011-12 TO FY 2015-16 ................................................. 6

1.3 ARR INCLUDING THE PAST RECOVERIES ........................................................................................................ 15

LIST OF TABLES

Table: 2-1: Past Recoveries ....................................................................................................... 8

Table: 2-2: Capital Expenditure & Capitalization ...................................................................... 8

Table: 2-3: Return on Equity ..................................................................................................... 9

Table: 2-4: Interest on Loan Capital .......................................................................................... 9

Table: 2-5: Interest on Working Capital .................................................................................. 10

Table: 2-6: Depreciation .......................................................................................................... 11

Table: 2-7: O&M Expenditure ................................................................................................. 11

Table: 2-8: Income Tax ............................................................................................................. 12

Table: 2-9: Statutory Appropriation ........................................................................................ 12

Table: 2-10: Non-Tariff Income ................................................................................................ 12

Table: 2-11: ARR for FY 2011-12 and Annual Transmission Charges from FY 2012-13 to FY

2015-16 .................................................................................................................................... 13

Table: 2-12: Revenue for FY 2011-12 ...................................................................................... 14

Table: 2-13: Net Annual Transmission Charges & Gap for FY 2011-12 .................................. 15

Table: 2-14: Net (Gap) / Surplus for FY 2011-12 ..................................................................... 15

Table: 2-15: Annual Revenue Requirement for the Control Period along with Past Recoveries

.................................................................................................................................................. 16

LIST OF ABBREVIATIONS

Abbreviation Description

A&G Administration and General

APR Annual Performance Review

ARR Annual Revenue Requirement

AS Accounting Standard

ATE Appellate Tribunal for Electricity

Capex Capital Expenditure

CPI Consumer Price Index

Crs Crores

CWIP Capital Works In Progress

DPR Detailed Project Report

EA 2003 The Electricity Act, 2003

FY Financial Year

GFA Gross Fixed Assets

GoM Government of Maharashtra

HO Head Office

HT High Tension

IDC Interest During Construction

IT Income Tax

kV Kilo Volt

kVA Kilo Volt Ampere

kWh Kilo Watt Hours

LA Licensed Area

LT Low Tension

MERC Maharashtra Electricity Regulatory Commission

MSETCL Maharashtra State Electricity Transmission Company Limited

MU Million Units

MVA Mega Volt Ampere

MW Megawatt

MYT Multi Year Tariff

O&M Operation and Maintenance

PLR Prime Lending Rate

PPA Power Purchase Agreement

R&M Repairs and Maintenance

R-Infra Reliance Infrastructure

RoE Return on Equity

Rs. Rupees

Abbreviation Description

SS Support Services

STU State Transmission Utility

TOD Time Of the Day

Tata Power The Tata Power Company Limited

Tata Power – G Generation Business of The Tata Power Company Limited

Tata Power – D Distribution Business of The Tata Power Company Limited

Tata Power – T Transmission Business of The Tata Power Company Limited

1 EXECUTIVE SUMMARY

The Tata Power Company Limited (“Tata Power”) is a company established in 1919. On April

1, 2000, The Tata Hydro-Electric Power Supply Company Limited (established in 1910) and The

Andhra Valley Power Supply Company Limited (established in 1916) were merged into Tata

Power, to form one unified entity. Consequent to the merger, the licenses of the above

mentioned companies were also merged and Tata Power was granted a license by the

Government of Maharashtra (GoM) for the supply of energy to the public in its Mumbai License

Area and to supply energy in bulk to Distribution Licensees, vide resolution No: IEA –2001/ CR-

10509/NRG-1, dated July 12, 2001.

Post enactment of the Electricity Act and the License Regulations notified by this Hon’ble

Commission, Tata Power as a deemed Licensee has submitted its license for modifications as

may be necessary to bring it in conformity with EA 2003.

Tata Power has been recognized as a deemed Transmission Licensee (“Tata Power-T”) by this

Hon’ble Commission under the EA 2003.

1.1 Filings under MYT Regulations, 2011

The Hon’ble Commission issued the MYT Regulations, 2011 on 4th February, 2011. As per

paragraph 7.1 of these MYT Regulations, a Transmission Licensee such as Tata Power – T is

required to file a Business Plan for the Control Period of five financial years commencing from

1st April 2011 to 31st March 2016. Tata Power-T had filed such a Business Plan separately with

the Hon’ble Commission. The Hon’ble Commission has issued an Order for the Business Plan on

28th June, 2012 (“Business Plan Order”), wherein it has been directed to Tata Power to submit

the MYT Petition for the Control Period (FY 2012-13 to FY 2015-16) with the approved Business

Plan as the basis along with the ARR for FY 2011-12.

1.2 ARR / MYT for the Second Control Period – FY 2011-12 to FY 2015-16

Tata Power, in this petition, has presented the Aggregate Revenue Required for the different

years of the Second Control Period. In line with the directive of the Hon’ble Commission the

ARR of FY 2011-12 has been arrived at using the old MERC Tariff Regulations, 2005 whereas the

ARRs of the balance four years i.e. FY 2012-13 to FY 2015-16 have been arrived at as per the

new MYT Regulations, 2011 and on the basis of the Business Plan approved by the Hon’ble

Commission in its order dated 28th June 2012.

In this regard, the Hon’ble Commission had in their Business Plan Order considered

capitalisation for (i) Schemes approved and (ii) Schemes that have been submitted to the

Hon’ble Commission for approval. Since the passage of time after the submission of the

Business Plan, there has been an inclusion of few DPRs for approval to the Hon’ble Commission.

We have included the impact of the same in our present MYT petition.

As the year FY 2011-12 has concluded, Tata Power – T is filing this Annual Revenue

Requirement petition for the transmission function for the year FY 2011-12 based on the actual

performance. Similarly projections for the period FY 2012-13 to FY 2015-16 have been modified

(with respect to the amounts give in the Business Plan order) for incorporating the actual

performance of FY 2011-12.

Tata Power has filed an appeal in the Appellate Tribunal of Electricity against the directive of

filing the performance of FY 2011-12 on the basis of MERC Tariff Regulations 2005. Tata Power

– T reserves the right to seek appropriate adjustments in the cost based on the decision of

Hon’ble ATE. The ARRs for the Transmission Licensee for FY 2011-12 and the rest of the Control

Period i.e. FY 2012-13 to FY 2015-16 have been carried out separately and details of the same

are presented in the Section 4: Annual Revenue Required (ARR) For FY 2011-12 and Section 5:

Projections of Annual Revenue Required (ARR) For the Control Period FY 2012-13 to FY 2015-

16

Tata Power –T had filed a petition for approval of truing up of Aggregate Revenue Requirement

for FY 2009-10 and Annual Performance Review for FY 2010-11. The Hon’ble Commission has

issued an order dated 14th February, 2012 for this petition in Case 106 of 2011. Tata Power

considers it appropriate to present the (Gap)/ Surplus for the past period as approved by the

Hon’ble Commission in the Order. However, Tata Power has appealed against this Order in the

ATE for certain issues. Tata Power – T reserves the right to seek appropriate adjustments in the

cost based on the decision of Hon’ble ATE.

1.2.1 Recoveries pertaining to the Past Period

The (Gap) / Surplus as approved by the Hon’ble Commission in their order dated 14th February,

2012 works out to be Rs. 8.66 Crores along with the interest upto FY 2012-13.

Table: 1-1: Past Recoveries

Rs. Crores

1 Impact of ATE Order dated 14th February 2011 -

2 Additional Recovery of RoE for FY 2008-09 due to

impact of re-instatement of Equity in the year (1.33)

3 (Gap)/Surplus of FY 2009-10 1.90

4 (Gap)/Surplus of FY 2010-11 7.00

5 Interest at SBI PLR rate of 14.39% for FY 2011-12 1.09

6 Total 8.66

Approved

Amount

1.2.2 Capitalisation during the Control Period

Tata Power – T has presented in the table below the actual capital expenditure and

capitalization for FY 2011-12 and the capital expenditure and capitalisation based on the

principle approved in the Business Plan for the period FY 2012-13 to FY 2015-16.

Table: 1-2: Capital Expenditure & Capitalization

Rs. Crores

Category

FY 2011-12

(Actuals)FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

FY 2011-12

(Actuals)FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

DPR 339.65 768.23 836.05 933.68 504.76 254.26 716.51 378.45 1050.26 1239.80

Non-DPR 31.26 34.18 16.49 6.16 6.49 20.46 32.99 20.64 6.36 6.49

HO/SS 3.81 5.00 5.00 5.00 5.00 3.81 5.00 5.00 5.00 5.00

TOTAL 374.72 807.41 857.53 944.84 516.25 278.53 754.50 404.09 1061.62 1251.29

Capital Expenditure Capitalisation

1.2.3 Return on Equity

On the basis of MERC (MYT Regulations) 2011, Tata Power - T has evaluated Return on Equity

for the period FY 2012-13 to FY 2015-16, whereas for FY 2011-12, the RoE has been computed

based on Tariff Regulations, 2005. The Table below indicates the RoE for FY 2011-12 to FY 2015-

16:

Table: 1-3: Return on Equity

(Rs. Crores)

1 Regulatory Equity at the beginning of the year 561.14 644.26 870.20 989.48 1,306.49

2 Less: Equity Portion of Asset de-capitalised /

retired during the Year (0.43) (0.42) (1.94) (1.48) (0.19)

3 Capitalisation 278.53 754.50 404.09 1,061.62 1,251.29

4 Equity portion of capitalisation 83.56 226.35 121.23 318.49 375.39

5 Regulatory Equity at the end of the year 644.26 870.20 989.48 1,306.49 1,681.70

Return Computation - - - -

6 Return on Regulatory Equity at the beginning of

the year 78.56 99.86 134.88 153.37 202.51

7 Return on Equity portion of capitalisation 5.82 17.51 9.24 24.57 29.08

8 Total Return on Regulatory Equity 84.38 117.37 144.13 177.94 231.58

Sr. No. Particulars FY 2011-12

(Actuals) FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

1.2.4 Interest and Finance Charges

The Interest costs have been captured under the following three heads:

Interest on Loan

Interest on Working Capital

Other Finance Charges

Interest on Loan

In addition to loans considered for financing the capitalisation from FY 2003-04 to FY 2010-

11, Tata Power –T has taken new loans for (i) financing the capitalisation in FY 2011-12 and

FY 2012-13. The details of the loans taken for funding the capitalisation for FY 2011-12 and

FY 2012-13 have been presented in Section 5.5 The Interest on Loan Capital at actuals for

FY 2011-12 and projected for FY 2012 - 13 to FY 2015 - 16 is as follows:

Table: 1-4: Interest on Loan Capital

Rs. Crores

Particulars FY 2011-12

(Actuals) FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

Opening Balance 384.31 550.03 1,000.66 1,177.28 1,775.05

Additions 194.97 528.15 282.86 743.14 875.90

Repayments 29.26 77.51 106.25 145.36 207.51

Closing Balance 550.03 1,000.66 1,177.28 1,775.05 2,443.45

Interest Rate 10.88% 10.87% 10.96% 10.98% 10.99%

Total Interest Expense 50.82 84.25 119.40 162.09 231.79

For FY 2012-13 to FY 2015-16, Tata Power – T has considered a weighted average interest rate

based on opening balance of existing loans for the particular year in line with Regulation 33.5 of

the MYT Regulations, 2011. Further, the interest rate for normative loans has been charged at

the weighted average rate as computed above.

Interest on Working Capital

The Interest on working capital has been computed based on the elements specified in the

Tariff Regulations, 2005 for FY 2011-12 and MYT Regulations, 2011 for the period FY 2012-13 to

FY 2015-16.

For the purpose of computations the interest on working capital for FY 2011-12, a weighted

average interest rate of 14.39% has been considered based on the weighted average short term

PLR of SBI prevailing in FY 2011-12. For the remaining years of the Control Period, a rate of

14.75% has been considered as this rate is prevailing at the time of filing of this petition.

Table: 1-5: Interest on Working Capital

Rs. Crores

Sr. No. Particulars FY 2011-12

(Actuals) FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

1One-twelfth of the amount of Operations &

Maintenance Expenses10.24 12.59 14.32 16.55 20.49

2One-twelfth of the sum of the book value of

stores, materials & supplies 16.98 16.98 16.98 16.98 16.98

3One and a half months equivalent of the

transmission charges42.23 56.71 70.82 89.10 118.97

4 Total Working Capital 69.44 86.28 102.12 122.63 156.45

Computation of working capital interest

5 Interest Rate (%) 14.39% 14.75% 14.75% 14.75% 14.75%

6 Interest on Working Capital 10.00 12.73 15.06 18.09 23.08

Other Finance Charges

The other finance charges are to the tune of Rs. 0.01 Crores for FY 2011-12.

1.2.5 Depreciation

Tata Power - T has computed the depreciation by applying the rates specified under the MERC

(Terms & Conditions of Tariff), 2005 for FY 2011-12 and the rates specified in MYT Regulations,

2011 for the period FY 2012-13 to FY 2015-16. Based on the same, the Depreciation works out

as shown in the Table below:

Table: 1-6: Depreciation

Rs. Crores

Particulars FY 2011-12

(Actuals) FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

Opening GFA 1,564.43 1,841.51 2,594.63 2,992.26 4,048.96

Total Depreciation 39.51 77.51 106.25 145.36 207.51

Avg Depreciation (%) 2.53% 4.21% 4.09% 4.86% 5.13%

1.2.6 O&M Expenditure

The O&M expenditure for the period FY 2012-13 to FY 2015-16 has been estimated considering

the number of bays and line lengths expected to be in operations for the Control Period as per

approved capitalisation in the Business Plan. The O&M Expenditure for the Control Period is

projected by applying the norms given in the MYT Regulations, 2011. For FY 2011-12 the actual

O&M expenditure incurred has been presented in line with the Tariff Regulations, 2005. The

projections of the O&M expenditure during the Control Period are as given in the table below:

Table: 1-7: O&M Expenditure

Rs. Crores

O&M Expenditure FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

Norm -Bays (Rs Lakhs/Bay)

>400 KV 99.11 104.78 110.78 117.11

Between 66 and 400 KV 30.12 31.85 33.67 35.60

Less than 66 KV 6.30 6.66 7.04 7.44

Norms Transmission Lines (Rs Lakhs/Ckt Km)

>400 KV 0.56 0.59 0.63 0.66

Between 66 KV and 400 KV 1.16 1.22 1.29 1.37

O&M Expenditure 122.82 151.14 171.83 198.61 245.91

1.2.7 Income Tax

The Income Tax has been computed for FY 2011-12 based on the actual income for Tata Power-

Transmission. In line with the MYT Regulations, 2011 the Income Tax for the period FY 2012-13

to FY 2015-16 has been considered as per latest Audited Accounts available i.e. for FY 2011-12.

The Income Tax thus applicable is as shown in the Table below:

Table: 1-8: Income Tax

Rs. Crores

ParticularsFY 2011-12

(Actuals)FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

Income Tax 37.00 37.00 37.00 37.00 37.00

1.2.8 Statutory Appropriation

The contribution to Contingency Reserves has been computed at 0.25 % of closing GFA for the

period FY 2011-12 to FY 2015-16 subject to not exceeding 5% of the GFA. The statutory

appropriation for FY 2011-12 to FY 2015-16 works out as shown in the Table below:

Table: 1-9: Statutory Appropriation

Rs. Crores

ParticularsFY 2011-12

(Actuals)FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

Statutory Appropriation 4.60 6.49 7.48 10.12 13.25

1.2.9 Non-Tariff Income

For FY 2011-12, Tata Power - T has provided the actual Non-Tariff Income and comprises of

Recurring items and Non-Recurring items. For the period FY 2012-13 to FY 2015-16, the Non-

Tariff Income has been considered at the same level as has been approved by the Hon’ble

Commission in the order for Business Plan dated 28th June, 2012 in Case 168 of 2011. The Non-

Tariff Income is as shown in the Table below:

Table: 1-10: Non-Tariff Income

Rs. Crores

ParticularsFY 2011-12

(Actuals)FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

Non-Tariff Income 11.85 32.84 34.56 36.39 38.32

1.2.10 Incentive on Transmission Availability

The Availability of the Transmission System of Tata Power for FY 2011-12 as certified by SLDC

was 99.46 %. The incentive for FY 2011-12 on the basis of the actual availability works out to Rs.

5.03 Crores. For the period FY 2012-13 to FY 2015-16, no incentive has been considered in line

with the Business Plan Order issued by the Hon’ble Commission dated 28th June, 2012 in Case

168 of 2012. However the same shall be computed and presented at the time of submission of

True-up of the respective years.

1.2.11 Annual Revenue Requirement

Based on the actual of FY 2011-12 and the projections of the various elements for the period FY

2012-13 to FY 2015-16, the ARR for different years is shown in the Table below:

Table: 1-11: ARR for FY 2011-12 and Annual Transmission Charges from FY 2012-13 to FY 2015-16

(Rs. Crores)

Particulars FY 2011-12

(Actuals) FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

O&M Charges 122.82 151.14 171.83 198.61 245.91

Interest on Long-term Loan 50.82 84.25 119.40 162.09 231.79

Interest on Working Capital 10.00 12.73 15.06 18.09 23.08

Other Finance Charges 0.01 - - - -

Depreciation 39.51 77.51 106.25 145.36 207.51

Return on Equity 84.38 117.37 144.13 177.94 231.58

Income Tax 37.00 37.00 37.00 37.00 37.00

Statutory Appropriations 4.60 6.49 7.48 10.12 13.25

Annual Transmission Charges 349 486 601 749 990

Add: Incentive 5.03 - - - -

Total Transmission Charges 354 486 601 749 990

Less: Non Tariff Income 11.85 32.84 34.56 36.39 38.32

Less: LCC cost allocatable to TPC-G and TPC-D 4.53

Net Aggregate Revenue Requirement from

Transmission Tariff 337.80 453.65 566.58 712.82 951.80

1.2.12 Sharing of Gains and Losses of FY 2011-12

The last ARR order issued for Tata Power-T was on 3rd September, 2010 in Case 97 of 2009

which was applicable for the year FY 2010-11. Since, FY 2011-12 was part of the Control Period

as defined in MYT Regulations, 2011, Tata Power had made a Business Plan submission for the

entire Control Period which included FY 2011-12. However, as directed by the Hon’ble

Commission, the Tariff Regulations, 2005 are applicable for FY 2011-12. In view of this, there

are no approved figures for FY 2011-12 which can be compared with the actual performance to

arrive at the Gains and Losses for FY 2011-12.

However, for the purpose of justification of expenditure of FY 2011-12 and to arrive at the

Gains and Losses, the applicable figures have been arrived at using the approved figures of FY

2010-11, in the Order dated 3rd September 2010, as the base and applying appropriate

escalation factors as per the philosophy adopted by the Hon’ble Commission in previous orders.

The applicable figures so arrived, their comparison with the actual expenditure and the

subsequent Gains and Losses are indicated below:

Gains and loss in O&M Expenditure

The Sharing of gains and loss for Tata Power - T has been worked out on the basis of the Tariff

Regulations outlined and also the categorisation of expenses. Based on the same, the Net

Entitlement to Tata Power-T work out to Rs. 122.82 Crores respectively.

1.2.13 Revenue from Transmission Business for FY 2011-12

The total Revenue earned for FY 2011-12 works out as given in the Table below:

Table: 1-12: Revenue for FY 2011-12

Rs. Crores

Tariff Order Applicable

Transmission

Charges recovered

per Month

No. of

Months

Total

Revenue

September 10, 2010 24.73 12 296.73

1.2.14 Net Annual Transmission Charges and (Gap) / Surplus for FY 2011-12

The break-up of the expenses for FY 2011-12 along with the adjustments on account of sharing

of gains and losses is as follows:

Table: 1-13: Net Annual Transmission Charges & Gap for FY 2011-12

Rs. Crores

Approved Figures

of FY 2010-11

Applicable

Figures for FY

2011-12

Entitlement as

per the

Regulations

Efficiency Gains /

(Loss) from

Controllable factors

shared with

Consumers

Net Entitlement (Including

Transfer to Reserves) after

Impact of Gains / (Loss)

from Controllable factors

I Revenue 308.58

-Transmission Charges 296.7300

- Other Income 11.85

II Expenditure

1 Operation & Maintenance Expenses 116.3 122.82 - 122.82

Employee Expenses 59.25 67.0

R&M 12.46 13.3

A&G 30.36 36.0

2Depreciation, including advance against

depreciation37.32 37.32

3 Interest on Long-term Loan Capital 41.72 41.72

4 Interest on Working Capital 10.00 10.00

5 Other Finance Charges 0.01 0.01

6 Incentive 5.03 5.03

7Statutory Appropriations/ Contingency Reserve

4.60 4.60

8 Income Tax 37.00 37.00

9 Return on Equity 80.38 80.38

10 Less: Load Control Cost Allocated to Tata

Power-G & Tata Power-D4.53 4.53

10 Total Expenditure 334.36 334.36

III Pure (Gap) / Surplus for FY 2011-12 (I - II) (25.78)

Sr. No. Particulars

As can be seen from the table above, the pure gap for FY 2011-12 is Rs. (25.78) Crores which is

computed as the difference between the Revenue earned for FY 2011-12 and the expenditure

of FY 2011-12 alone. The resultant net (Gap)/Surplus for FY 2011-12 along with the past

recoveries works out to Rs. (17.13) (17.13) Crores.

Table: 1-14: Net (Gap) / Surplus for FY 2011-12

Sr. No. Particulars

1 Pure (Gap)/Surplus for FY 2011-12 (25.78)

2(Gap) / Surplus as per Order dated 14th

February, 2012 in Case 106 of 2011 8.66

3 Net (Gap)/Surplus (17.13)

1.3 ARR including the past recoveries

After considering such past recoveries the total ARR for the different years of the control period

is as follows:

Table: 1-15: Annual Revenue Requirement for the Control Period along with Past Recoveries

(Rs. Crores)

Particulars FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

ARR for the year 453.65 566.58 712.82 951.80

Past Recoveries/ ATE

judgment dated 31st August

2012 impact*

51.84

Total ARR to be recovered 505.48 566.58 712.82 951.80

The Hon’ble Commission is requested to kindly approve the above ARRs for the Control Period.